Many small businesses in UAE today don’t fully grasp the risks which financial fraud can have on company bottom line. Entrepreneurs and investors all need to be aware of the different kinds of fraud to protect company finances, employees, and the business as a whole.
7 Common Fraud Risks in UAE
Here are the 7 kinds of fraud that payroll specialists in UAE encourage businesses to be wary about:
- Payroll Fraud
Payroll fraud, unfortunately, makes up nine percent of the occupational fraud not just in UAE but worldwide. Businesses have a particularly high risk for falling victim to payroll-related fraud. According to payroll experts, most businesses don’t implement anti-fraud controls set in place.
Payroll fraud in UAE presents itself in various different ways. An employee, for instance, is paid with an hourly wage. If an employee gets paid more hours than what the person actually worked for, then that’s payroll fraud. Payroll fraud can also occur when certain salaried staff members gain access to their payroll records, then boost their salaries. Additionally, payroll fraud in UAE occurs when commissioned employees report false orders or sales.
To prevent payroll-related fraud, it is imperative to talk to payroll specialists providing outsourced payroll service in UAE for guidance in implementing anti-fraud controls. Also, have experts review employee timesheets and payroll records regularly.
- Vendor billing fraud
Vendor billing fraud occurs when employees create shell companies then pay the shell companies with business checks. Vendor billing fraud is similar to fraudulent invoicing fraud or check tampering fraud.
Some warning signs your business needs to consider are the cheques which are written out to a business listing that has the same address as the home of an employee or cheques written to cash. An additional kind of vendor fraud occurs when a person hires a family member or friend that has a business of his/her own for goods and/or services. This family member or friend may be overcharging the business to make a lot more money, then the person hiring the vendor agrees for a commission or some other form of benefit. A way in averting vendor billing fraud in UAE is to vet vendors prior to signing a check.
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- Invoice email
This particular scam often involves a perpetrator who poses as a legitimate supplier then advises changes to an existing payment arrangement. This fraud is often not detected up until it is already too late. This is when the business gets an alert by a complaint from the supplier that the payment has not been received. A regular account check-in will help guard a business owner from falling victim to invoice email fraud.
- Revenue skimming
Skimming revenue is one type of fraud which commonly takes place whenever cash is provided to a customer at a business. Revenue skimming happens when a customer pays cash for a product or service. A cashier of the business just needs to make sure a customer doesn’t get a receipt. An employee will collect cash from a customer, then pocket it. As there isn’t any paper trail, there’s no record for a product or service being delivered or sold. In order to safeguard your business from revenue skimming, rotate duties among several different employees.
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- Financial statement fraud
Financial statement fraud is fudging important numbers such as revenues, sales, assets, and liabilities. This is usually done in order to dupe the public or investors, increase bonuses, or manipulate stock. While this is a rare kind of fraud that happens within business organizations, it’s one of the types of fraud that are most damaging.
To avoid it, make sure you delegate the different accounting functions onto different employees. Examine the financial statements more closely and look for inaccurate information or inconsistencies prior to publishing.
- Tax fraud
Tax fraud or tax evasion is the kind of fraud which happens when expenses and earnings of a company are misreported during the tax return filing with the Federal Tax Authority in UAE. To avoid tax fraud, don’t overreport or underreport expenses and earnings of your business. File the taxes completely, on time, and accurately.
- Identity, intellectual property, and data theft
Lots of businesses in UAE handle sensitive information. This includes intellectual property and personal data. Intellectual property theft damages a business when an employee leaks patents and trade secrets to the competitors. Identity theft may also hurt the reputation of the business due to low customer trust.
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A business can avoid it through the restriction of access to sensitive, high-level paperwork. Security policies must be set in place, most especially on the handling and classification of sensitive information.
Business losses from fraud can actually break an organization. To ensure you have the appropriate controls in place for preventing fraud and eliminating risks, talk to the payroll specialists of Payroll Middle East today!